Tesla projects GAAP profit in Q4 2016; 80k-90k new Model S and Model X in 2016
11 February 2016
In its Q4 and Full Year 2015 update, Tesla projected being net cash flow positive and achieving non-GAAP profitability for the year, even factoring in a $1.5-billion investment to add more production capacity, start cell production at the Gigafactory, and establish additional customer support infrastructure. Tesla expects moderate GAAP profitability is expected in the fourth quarter. Model 3 is on schedule to be unveiled on 31 March, with production and delivery slated for late 2017.
Tesla delivered 17,478 vehicles in Q4, including 206 Model X vehicles. Tesla directly leased 881 cars to customers in Q4, about the same percentage as last quarter and worth $85 million of aggregate transaction value. As expected, Model S average transaction price declined by about 2% due to vehicle and option mix. Price increases outside the US offset the impact of unfavorable movements in foreign currencies during the quarter.
Q4 Automotive gross margin, excluding $8 million of ZEV credit revenue, was 20.9% on a non-GAAP basis and 19.2% on a GAAP basis. These margin measures were burdened by $67 million non-GAAP ($51 million GAAP) of unfavorable labor and overhead allocations associated with lower than planned Model X production volume, and non-recurring asset impairment charges for obsolete painting equipment and Model S components as Tesla transitioned to improved production processes and designs. Excluding these items, Q4 Automotive gross margin was 25.0% on a non-GAAP basis and 23.7% on a GAAP basis. This represented sequential improvement, despite a decline in average transaction price in Q4.
| Tesla has sold more than 107,000 vehicles in 42 countries, with nearly 2 billion VMT. Tesla Autopilot is learning at the rate of more than one million real-world miles per day. |
The Q4 non-GAAP net loss was $114 million, or $0.87 per share, and our Q4 GAAP net loss was $320 million or a loss of $2.44 per share, both based on 131 million basic shares. For full year 2015, net loss was $2.30 per share on a non-GAAP basis and a loss of $6.93 per share on a GAAP basis, both based on 128 million basic shares.
Tesla Motors reported $179 million of positive cash flow from core operations defined as cash flow consumed in operations of $30 million plus cash of $209 million received from vehicle sales to leasing partners. Global Q4 deliveries were up by more than 50% compared to the preceding quarter, and up 76% from Q4 2014.
New Model S orders grew over 35% year on year in Q4, with growth in all regions. Model X reservations grew over 75% as compared to the prior year.
During Q4, Tesla reduced Model S production costs, started volume Model X production and produced a record 14,037 new Tesla vehicles. Tesla anticipates approaching a Model X production rate of 1,000 vehicles a week in Q2.
Total Q4 non-GAAP revenue was $1.75 billion for the quarter, up 59% from a year ago, while GAAP revenue was $1.21 billion. For full year 2015, revenue totaled $5.29 billion on a non-GAAP basis, up 47% from 2014, and $4.05 billion on a GAAP basis. Total Q4 gross margin was 20.0% on a non-GAAP basis and 18.0% on a GAAP basis.
Automotive revenue in Q4 was $1.65 billion on a non-GAAP basis, and comprised GAAP Automotive revenue of $1.12 billion plus a net increase of $533 million related to cars with a resale value guarantee or collateralized borrowing and subject to lease accounting.
Q1 and Full Year 2016 Outlook. Tesla plans to deliver 80,000 to 90,000 new Model S and Model X vehicles in 2016, representing accelerating growth over 2015 at the midpoint of the range. The company expects its average vehicle transaction price to increase slightly during 2016, as Model X grows to become a larger share of our deliveries throughout the year. In Q1, it plans to grow deliveries 60% year on year to approximately 16,000 vehicles, and plans to lease directly about the same percentage of cars as it did in Q4.
By year-end, Tesla projects Model S gross margin to approach 30% and Model X gross margin should be about 25%, with continued improvement for Model X in 2017.
Full year total operating expenses should increase by about 20%.
Why does TESA insists on misleading non-GAAP accounting standards? Is it to show lower losses and/or higher profits for Wall Street?
Anyway, it may be correct to show both methods.
Posted by: HarveyD | 11 February 2016 at 11:54 AM
Harvey, Non-GAAP is not misleading, it just requires understanding. It's good that they report both, so that the bean counters can understand some part of the plan. I know it's difficult for those with MBA to comprehend complex issues and plans. Non-GAAP is simply a method that recognizes that growth and investment in real assets has an intrinsic value that is not out the door when it is made. It is a value that will be returned at least in part. Saying that a purchase of real assets has zero value is what GAAP does. It's like saying that even though my house was paid of, it now is worth nothing. Of course I don't have investors or bean counters, so I don't have to pretend that the GAAP rules make sense.
Posted by: Brotherkenny4 | 11 February 2016 at 01:17 PM
Non-GAAP can be very misleading, depending on how trustworthy corporate management is. You really need to dive into the details to understand what is actually going on.
Posted by: Nick Lyons | 12 February 2016 at 03:48 PM
There are a few ways to go around many GAAP's variable property value management restrictions but less than without GAAP.
The idea was/is to apply fixed known accounting standards to reduce the total effects of smart accounting on real profits and deficits.
Without GAAP, financial reports are opened to 1001 internal rules and interpretations and become rather meaningless?
Posted by: HarveyD | 15 February 2016 at 08:13 AM